Multinational companies can achieve tax avoidance by manipulating product pricing, which usually involves the use of transfer pricing strategies. Transfer pricing refers to the prices set when multinational companies trade goods, services or assets internally. This strategy includes the following aspects: 1. **Adjusting prices of related-party transactions**: Multinational companies often trade between subsidiaries in different countries. By artificially adjusting the prices of these related-party transactions (i.e., transfer pricing), companies can shift profits from high-tax countries to low-tax countries. For example, a company may sell products at a high price to subsidiaries in low-tax countries and sell them at a low price to subsidiaries in high-tax countries. 2. **Using tax havens**: Companies can set up subsidiaries in tax havens and then shift profits to these subsidiaries through high pricing to reduce the overall tax burden. These tax havens often offer very low or zero corporate income tax rates. 3. **Intangible asset pricing**: There is often great flexibility in the transfer pricing of intangible assets such as patents, trademarks and copyrights. Companies can transfer the ownership of intangible assets to subsidiaries in low-tax countries and then charge high royalties to reduce profits in high-tax countries. 4. **Financing structure adjustment**: Through cross-border borrowing arrangements, companies use debt-equity ratios to effectively manipulate interest payments to transfer income and reduce taxable income. 5. **Customer and supply chain management**: By reorganizing supply chains and customer relationships, profits are concentrated on operating entities in low-tax regions. Governments are usually wary of such tax avoidance and restrict it through anti-tax avoidance regulations, transfer pricing guidelines and bilateral tax agreements. In order to comply with local regulations, companies need to prepare sufficient documentation to prove that their transfer pricing complies with market pricing principles (i.e., the "arm's length principle").